The Real Estate Division of our firm has closed thousands of real estate transactions. We have handled all aspects of real estate, both residential and commercial, including acquisitions, sales, leases, and financing, representing Institutional and Private Mortgage Lenders in documentation and closings throughout the United States.
These questions and answers are primarily for residential closings in New York State. For questions on commercial closings in New York, as well as closing for New Jersey, please contact our offices at 516.569.3030 and ask for Fay Stern.
Frequently Asked Questions:
Q: At what point should I contact a lawyer when I am selling or buying a house?
(1) As a seller:
You should contact a lawyer before you sign any brokerage agreement and have them review it. Even if it is a “standard” agreement, you may still want to add or change certain language for your protection. For example, if you have someone who has seen the house and was interested before hiring a broker, you would want to have an exclusion regarding that potential buyer. Also, you want to add language stating that the commission is only due “as, if and when title closes”—if the deal falls apart, you don't want to be liable to pay the broker anyway.
In addition, there are some tax considerations when selling a property, which I have addressed in more detail below. .
(2) As a buyer:
You should contact a lawyer when you have a house you are serious about purchasing. Be aware that you should not allow brokers or lender to run your credit scores when you are shopping around for rates, since every hit could bring down your score. Also, an attorney specializing in real estate will know approximately how much your closing costs will be for your purchase. These are costs including title insurance, bank closing costs such as appraisal, miscellaneous fees, escrows, bank legal fees, etc., which you will need to have available at closing, besides the monies you are putting down for the house. There may also be additional taxes due to the State for certain 1-3 family house over $1,000,000 which you need to be aware of and account for in your calculations. An attorney will also explain the step by step procedure for your purchase so you know what to expect.
Q: Do I need an attorney when I am doing a refinance?
A: It is recommended that you hire an attorney if you are doing a refinance. While you think it is a simple procedure and want to save the money on a legal fee, most times the attorney can actually save you money. They can review the closing costs and the title fees and try to make sure they are accurate and customary. There are certain discounts that are available to you if you are paying off an existing mortgage, or have taken out a mortgage in the last 10 years, and we make sure you get what you are entitled to receive. We have experienced occasions where the lender has made a mistake on their documents and needed correction, or that the documents were not explained properly to the homeowners, even if it was not intentional. Remember, the lender's representative is representing the lender, not you. If you are obligating yourself to thousands of dollars to a lender, it would make sense to spend a few hundred dollars on a lawyer to make sure you know what you are signing and that you are protected.
Regarding commercial or investment property refinances, a seasoned real estate attorney will help negotiate your commitment before you lock yourself into the bank's terms, so that you have more favorable terms and conditions. There may also be complex title issues that an attorney can help clear up to assure a smooth closing. In addition, there may be procedures to help save you money on title fees and mortgage taxes, which can be quite substantial depending on the amount of the loan.
Q: What are my closing costs when selling a house?
A: There are certain transfer taxes that a seller must pay at closing. One transfer tax is to New York State, which is equal to $2.00 per $500.00 of the gross sales price. The second transfer tax depends on the County where the real property is located. The five boroughs have a transfer tax of 1% for 1,2 or 3 family houses, coop or condo, up to a gross price of $500,000 and 1.425% for 1,2, or 3 family houses over $500,000.00. Commercial properties have a higher transfer tax, ranging from 1.425% for properties under $500,000 and 2.625% for properties over $500,000. In addition, each county or local area may have their own additional transfer taxes
If you have a broker, you will also have to pay a brokerage commission, if applicable. If you have a mortgage, you will have to pay it off at the closing, and have to pay the title company to record the satisfaction, which fees vary from $150- $750, depending on the County where the document is being recorded, and have the title closer arrange for the exchange of the payoff and satisfaction, which could also run anywhere from $250-$350.
In addition, there are Federal and State Gains taxes which you need to take into consideration, and which may be substantial, depending on the type of property you are selling. There are some legal creative ways of deferring certain gains tax, especially with investment properties, which our firm is experienced in handling
Q: What are my closing costs when purchasing a house?
A: There are several costs involved in purchasing a house or a condo. If you are getting a mortgage, there are bank-closing costs including appraisal fee, application fee, lender legal fee, prepaid interest and escrows for taxes and insurance. You should get a good faith estimate of these charges from your lender within 3 days from the date of your application. You should have your attorney review them to make sure they are accurate and customary. You also have title insurance fees, and the title company runs searches through public records to make sure that the house you are buying is free and clear of any liens. You also have to pay a mortgage tax, which varies depending on the county where the real estate is located. As a general rule, your closing costs should run about 4-6% of your mortgage (not gross purchase) amount, as most costs are associated with the loan amount.
Q: Why do I need title insurance?
A: Title insurance you purchase as a homeowner is a one-time premium that you pay for a Fee Title Insurance Policy which shows that you are the owner of the house or condo, and that it was free and clear of any liens when you purchased. If anyone makes a claim after you bought the house, your title policy would take care of that claim. They will also check to see if there are any easements or restrictions on your property, and see that all real estate taxes were paid up through the date of closing. They will also search public records to see if there are any violations of record, and a survey will indicate if there are any encroachments on your property.